Are unpaid debts a military career-killer?

Military personnel who have trouble handling their personal finances can very quickly find their duty status, potential promotions and even military careers in jeopardy. And, over time, the lingering burden of debt can add stress to their personal relationships and damage their credit profile. But does that debt have to be a career-killer?

Servicemembers, veterans and military families have submitted more than 11,000 debt collection complaints to the CFPB since we began accepting them in July 2013 – our fastest-growing category of complaints. Among other things, we’ve received reports that some debt collectors are threatening servicemembers by claiming that they will report the unpaid debt to their commanding officer, have the servicemember busted in rank or even have their security clearance revoked if they don’t pay up.

The threat of losing a clearance is a hot-button item for servicemembers – and some debt collectors have been known to use that threat as leverage to get a servicemember to pay. Do they really have the power to get your clearance revoked?

Practically speaking, debt collectors aren’t able to contact your security manager about your debts nor do they have the authority to influence the manager’s decisions about your security clearance. However, your failing to pay your debts on time can result in negative information being reported to the credit reporting bureaus. And that negative information on your credit report may cause your security clearance to be pulled when it’s up for review.

If you find that your finances have put your security clearance in jeopardy, you should do your best to show that your financial problems resulted from circumstances beyond your control (not a pattern of irresponsible behavior) and that you acted as responsibly as you could under the circumstances. This may include showing that you’re currently living within your means, that you’re making a good-faith effort to resolve your unpaid debts, and that you’re disputing debts that aren’t yours.

When a financial problem arises, you should speak with your installation’s Personal Financial Manager (PFM) and/or JAG office to get free, expert advice and assistance. Be sure to keep documentation of all your commitments, efforts to resolve delinquencies, and any disputes about debts – it could be helpful to you later.

If you do receive notice that your security clearance eligibility is being denied or revoked, DoD regulations give you the right to a hearing before an Administrative Judge of the Defense Office of Hearings and Appeals (DOHA). This hearing is your opportunity for a face-to-face meeting with an official, independent of your chain of command, to explain your situation and the steps you’ve taken to address the issues identified in a written Statement of Reasons (SOR).

According to DoD, DOHA hearings are designed to be user-friendly. If you don’t have an attorney, you can represent yourself or bring a non-attorney representative to assist you. DOHA hearings allow you to present any statements or documents that are relevant to your situation. In other words, the DOHA hearing is your chance to present your side of the story. It’s there to make sure that your voice is heard and that you are being treated fairly.

Be alert to the deadlines in the SOR process, seek expert assistance, ask for the opportunity to appear personally before a DOHA Administrative Judge, and bring whatever documentation and character witnesses you can.

A written transcript of your testimony and the testimony of any witnesses whom you bring to the hearing will be provided to you free of charge. That transcript, along with copies of any documents you submit (such as canceled checks, receipts, bank statements, tax returns, settlement agreements, character recommendations, etc.), and the Administrative Judge’s recommendations will become a significant part of the record that is forwarded to the officials deciding your security clearance eligibility.

Check out the DOHA website for more information on hearings and process.

Managing your debts, expenses, income and other personal finance matters is more than just a tactic to guard your security clearance. It’s also a day-to-day exercise that can help lead you and your family to financial security. If you need help planning, hit a bump or need assistance with a problem you can’t fix along the way, there are a number of resources available to you.

Like your installation’s PFM, the Department of Defense’s Military OneSource offers free financial counseling that can help you better manage your money. If you need a fast and accurate answer to a money question, you can check out Ask CFPB – we have more than 1,000 answers that you can search. Finally, if you have a problem with debt collection or another consumer financial product or service, you can submit a complaint to us online or by calling (855) 411-2372. We are here to help.